By Rob Lever, AFP
January 31, 2014, 12:01 am TWN
WASHINGTON -- Google has agreed to sell Motorola to Chinese technology giant Lenovo for US$2.91 billion, after a lackluster two-year effort to turn around the smartphone maker it bought for US$12.5 billion.
The deal ends Google's run as a handset maker after it biggest-ever takeover, which was announced in 2011 and finalized in 2012.
It also provides Lenovo footholds in smartphone and tablet markets where it is eager to gain traction while acting as a peace offering to Samsung and other partners that make devices powered by Google-backed Android software.
“It is win-win,” said analyst Tim Bajarin of Creative Strategies in Silicon Valley. “Google keeps the patents and the research group, and they keep partners off their back, while Lenovo gets what they need to get into the U.S. smartphone market.”
The deal comes just a week after Lenovo said it will buy IBM's low-end server business for US$2.3 billion, giving it a platform to compete in that sector with U.S. giants Dell and Hewlett-Packard.
However, Lenovo's Hong Kong-listed shares dived 8.21 percent to HK$10.06 on Thursday as investors were spooked about Motorola's profitability.
Even under Google, Motorola failed to gain traction in a rapidly evolving smartphone market now dominated by South Korea's Samsung and U.S.-based Apple.
Google and Lenovo claimed the deal was good for everyone involved.
“Lenovo has the expertise and track record to scale Motorola Mobility into a major player within the Android ecosystem,” Google chief executive Larry Page said in a statement.
Lenovo chairman and chief executive Yang Yuanqing said the acquisition “will immediately make Lenovo a strong global competitor in smartphones. We will immediately have the opportunity to become a strong global player in the fast-growing mobile space.”
The Chinese firm was the fifth-largest smartphone maker in the fourth quarter, with a 4.5 percent market share, barely behind fellow Chinese maker Huawei and South Korea's LG, according to a report by research firm IDC.
'Lenovo gets foothold in America'
Ramon Llamas, at IDC, said with Motorola added in, Lenovo will be number three globally and gain other benefits.
“Lenovo gets an all-important foothold in North America and in Latin America, and to a lesser extent Western Europe,” Llamas said.
“Motorola has distribution, it has brand recognition, Lenovo does not have that.”
Lenovo became best known in the United States after buying IBM's PC business in 2005, and used that to become the world's biggest PC maker in 2013.
However, JP Morgan analysts said in a note to clients that Motorola is deeply unprofitable with losses approaching US$1 billion and questioning whether Lenovo can get the business in the black.
They asked: “Are they buying a bit more than they can chew?”
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